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Law Professor Touts Air Act Power To Craft North American Carbon Program

May 26, 2016

A prominent law professor is arguing that section 115 of the Clean Air Act could be the basis for a North American greenhouse gas trading or tax program -- with no new action required from Congress -- expanding upon prior claims from other legal experts that the provision could be used to craft a domestic, economy-wide trading program that goes beyond EPA's current sector-based GHG rules.

The pitch comes as EPA appears unlikely in the short term to use its section 115 authority, and as the future contours of climate change policy await both the November presidential election and resolution of lawsuits over EPA's GHG existing source performance standards (ESPS) for power plants.

Nevertheless, the notion of using section 115 to broaden U.S. climate efforts has sparked both significant interest and opposition, including discussion at a May 24-25 invitation-only carbon pricing forum hosted by the Aspen Institute in Washington, D.C.

In addition to discussion of the novel section 115 approach, participants at the recent event discussed other options to craft “mega national or tri-national frameworks,” according to a meeting agenda, including by expanding existing state and provincial trading programs in California and the Northeast.

“[T]he United States will need to find other ways to reduce GHG emissions if it is to live up to its international emissions reduction pledge,” writes Michael Burger, executive director of the Sabin Center for Climate Change Law, in one of several briefing papers for the event, touting the potential role of the clean air act provision in a “North American carbon price agreement.”

Proponents of the idea note that section 115 is aimed at cutting domestic emissions that harm other countries, making it particularly apt for addressing climate change. Under the section, EPA can craft a rule limiting domestic GHGs if it makes two findings.

The first is an endangerment finding -- similar to its 2009 determination that spurred EPA's light-duty vehicle rules -- that domestic GHGs contribute to climate change and harm other countries.

The second would be a “reciprocity determination,” based largely on the Paris climate agreement, showing that other countries are also making efforts to reduce emissions.

A prior paper by Burger and several legal experts outlined a detailed legal argument that EPA could then craft an economy-wide domestic emissions trading program, which could replace or complement the ESPS and other sector-specific climate rules.

EPA has suggested that it is not moving forward with the section 115 process for GHGs, with a spokesperson earlier saying it is focused on implementing President Obama's Climate Action Plan. That means that any section 115 rule would have to be crafted by the next administration, likely if Democrats retain the White House.

Even so, the new paper calls the justification for a section 115 rule “rock solid” in the wake of the Paris Agreement. It also expands upon the earlier paper, arguing that the provision allows for “close integration of climate policies” across the United States, Canada and Mexico through international emissions trading or potentially even carbon taxes.

“The section could thus become the mechanism for a harmonized North American approach,” the paper says. “EPA could enter into a comprehensive international trading program with Canada and Mexico if all three countries enacted regulations that codify the shared program in a similar or the same fashion.”

'Reciprocity' Support

Burger also cites prior legislative history related to the provision to suggest that a future administration could use section 115 for such a carbon effort without requiring a “new agreement” with Canada and Mexico, language that a source familiar with the argument says downplays the need for any new treaty between the countries.

Burger's paper, however, adds that establishing “reciprocity” with Canada and Mexico would “bolster the legal case” for action. He further argues,“There is a strong case to be made that reciprocity already exists with both countries,” including the 1993 North American Agreement on Environmental Cooperation, that “provides for international notice and comment on environmental measures,” and “subsequent regulatory cooperation agreements” between North American nations.

In further support of the idea that reciprocity -- and venues for ensuring it -- already exists, Burger cites an array of contexts in which the U.S., Canada, and Mexico already cooperate, including: opportunities to discuss and comment on the climate policies through face-to-face discussions at the leader level; strategic planning through the Commission on Environmental Cooperation; the Clean Energy Dialogue with Canada; a Bilateral Clean Energy and Climate Change Task Force with Mexico; the newly announced North American Energy Ministers' Working Group on Climate Change and Energy; and other efforts to harmonize vehicle and appliance standards and power plant rules.

North American Cooperation

Participants at the Aspen Institute event also discussed other options for increased North American climate cooperation, centered largely on expanding existing state and provincial trading markets.

For example, another background paper for the conference, from California Air Resources Board Chairwoman Mary Nichols and board advisor Steven Cliff, discusses the option of linking California's program both with other trading regimes and with sector-based GHG efforts.

California has already linked its cap-and-trade program with Quebec, and is “actively working on expanding the market to include the Province of Ontario,” the paper says.

As an example of sector-based linkage, it highlights California's plan to allow state-regulated entities to purchase GHG credits generated from projects in Brazil to prevent tropical deforestation.

Further, the paper notes that California is preparing a plan to comply with the power plant ESPS, and it “continues to assess how power sector linkage could occur within the Cap-and-Trade Program, and how it could meet [state statutory] linkage requirements.”

A separate background paper from the Union of Concerned Scientists says “it would not be unreasonable” for the Northeast's Regional Greenhouse Gas Initiative (RGGI), and the California-Quebec markets to link together “in the early 2020s,” particularly if RGGI credit prices rise as is expected over time.

Another paper from former Canadian environment minister Jim Prentice and Kate Salimi of the Wilson Center suggests policymakers should consider creating a “high level strategic framework” for a North American carbon pricing system that would ultimately require buy in from the heads of government of each country. -- Doug Obey(